ISL earnings preview: volumes improve, but price cuts hurt profits

International Steels Limited (ISL) is expected to post mixed financial results for the April–June 2025 quarter (4QFY25). While sales volumes have picked up, falling steel prices and competition from cheaper imports have put pressure on profits.

What to expect this quarter?

• Earnings per share (EPS) for the quarter are expected at Rs0.88, down 36% from last year, and 8% lower than the previous quarter.
• Sales are expected to come in at Rs14.1 billion, up 6% YoY and 1.5% QoQ.
• Profit after tax is projected at Rs382 million, down sharply from Rs595 million last year.

What’s driving these numbers?

1. Higher Volumes, But Lower Prices:
   ISL sold more steel this quarter, thanks to some recovery in demand from industries like auto manufacturing. However, this gain was mostly offset by a big drop in local cold-rolled coil (CRC) prices, down 8% YoY.
2. Import Pressure:
   The company had to cut prices by Rs15,000/ton in March to compete with cheaper imported steel, especially Galvalume coils, which are entering the market through duty loopholes. This added pricing pressure trimmed gross margins by 60 basis points (bps).
3. Margins Under Pressure:
   • Gross margin is expected at 9.2%, down from 10.1% last year.
   • Net margin is also squeezed, at just 2.8% vs 4.5% in 4QFY24.
4. Finance Costs Improve:
   On the bright side, ISL’s finance costs dropped by 43% YoY, thanks to lower debt and falling interest rates. This helped cushion some of the pressure on profits.

What it means for investors?

ISL’s performance shows that volume recovery alone isn’t enough, price competition, especially from imports, is still a big hurdle. The company’s efforts to manage costs and reduce debt are positive, but earnings remain under pressure until pricing power returns.

FY25 snapshot

• Full-year EPS expected at Rs3.06, reflecting the tough environment in the flat steel market.
• While topline growth is steady, margins remain thin, and ISL may need to focus on policy support (like anti-dumping enforcement) and higher-value products to protect profits in FY26.

ISL is growing sales, but shrinking margins are a concern. Until pricing pressure eases or import duties are tightened, earnings may remain soft. Long-term investors should watch how ISL navigates competitive imports and rising costs.

Source: Ismail Iqbal Securities (Pvt.) Limited

⚠️ This post reflects the author’s personal opinion and is for informational purposes only. It does not constitute financial advice. Investing involves risk and should be done independently. Read full disclaimer →

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